TaxTMI 
TaxTMI 
2022 (1) TMI 1505
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....se are that, assessee filed its return of income for A.Y. 2010-11 on 29th September, 2010 along with the computation of income, Audited income and Expenditure Account and Balance Sheet disclosing Rs.. NIL as total income. The return was selected for scrutiny under CASS and notices u/s. 143(2) and 142(1) of Income-tax Act, 1961 (in short "Act") issued and served on the assessee. In response Ld. AR of the assessee attended from time to time and filed the information as called for. 4. The brief background of the assessee company is, Mumbai Metropolitan Region Development Authority primarily known as MMRDA is a local authority created by the Govt. of Maharashtra by enacting MMRDA Act, 1974. Being the Local Authority in terms of MMRDA Act as well as within the meaning of Section 10(20) and 10(20A) of the Income-tax Act, 1961 it enjoyed the blanket exemption under the Income Tax Act up to the A.Y. 2002-03 as per the then provisions of Section 10(20) & 10(20A). The Finance Act, 2002 deleted the provision of Section 10(20A) along with other provisions and introduced a new definition of Local Authorities u/s. 10(20) wherein Panchayat, Municipality, Municipal Committee and District Boards....
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....n cancelled by DIT (Exemption) Mumbai in December 2011, Against the same the assessee has filed an appeal before Hon'ble ITAT, Mumbai which is yet to be decided. The assessee has claimed itself as a Local authority, but it cannot be considered as Local! authority within the meaning of section 10(23) of the I. T. Act. Hence, its income from house property, interest, etc. are liable to income tax. In this context it is worthwhile to refer the Allahabad High Court decision in the case of U. P. State Road Transport Corporation vs. Commissioner of Income tax (2006) 286 ITR 350 (ALL.) wherein it has been held that the U. P. State Road Transport Corporation is not a Local Authority within the meaning of section 10(20) of the I. T. Act, 1961 and its income from house property, capital gains and business of supply of goods and services is not exempt to the extent provided in section 10(20) of the I. T. Act. While deciding the issue the decision delivered in the case of Calcutta State Transport Corporation vs. CIT 1996 (219 ITR 515) (SC) and CIT vs. U.P. Forest Corporation (1998) 230 ITR 945 (SC) were followed. In the said case the assessee for the A. Y. 1977-78 had claimed exemptio....
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....t in course of fulfilling the objects of the entire regional development of Mumbai Metropolitan Region, under the Government Resolution, the assessee authority develops and sells certain plot of land under the directives of Government of Maharashtra (GOM). This fact is duly reflected in the accounts (reviewed by the C&AG) where the lease premium charged on long term lease of the developed land is credited to the account of the State Government and is reflected as the liability. It is not considered as the income of the assessee. 3. Non-applicability of the proviso to section 2(15) of the Act The proviso to sub-section 15 to Section 2 of the Act reads as under "Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business or an activity of rendering any service in relation to a trade commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity.) Provided further that the first proviso shall not apply if the....
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....d it cannot be said that its activities are not genuine" The facts of the aforesaid case are similar to the assessee's case, the lease premiums received are in the course of discharging its objects and hence the proviso cannot be applied. It is submitted that having regards to the objects, functions and power of the assessee, it can be inferred that the assessee is formed to develop the infrastructure of Mumbai region under the directives of the GOM and that it is not formed with an object of conducting activities to earn profit. Thus, there is nothing in the MMRDA Act that it suggests that "profit motive" is the objective which is the pre-requisite for carting on "business". 9. During assessment proceedings Assessing Officer observed that there was a survey conducted by ITO (TDS)-2(3), Mumbai on 10th February, 2011. During the course of the survey it was found that assessee received lease premium against the property from different parties. In this regard assessee was asked to furnish details of lease premium. In response, Ld. AR of the assessee submitted as under: - "The Authority has auctioned land in Bandra Kurla Complex to the various companies an....
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....ings and the Government of Maharashtra as short term deposits. These term deposits have not been received by on due dates from the Government of Maharashtra / public sector undertakings. Further, no interest was provided on the following deposits for the current year amount to Rs.. 69.31 Crores. Details are as per the chart given below: - Sr. No. Name Deposit Amount Interest not accounted 1 Maharashtra Co. op. Cotton Growers Marketing Federation Ltd. 335.00 40.03 2. MKVDC 180.00 18.00 3. MSFC 40.00 5.14 4 Maharashtra Film Stage & Cultural Development Corporation 3.17 0.54 5. Government of Maharashtra (SPPL) 89.72 5.38 6. Maharashtra Jeevan Pradhikaran 2.44 0.22 12. Further Assessing Officer observed from the Audited Note IV that assessee has given loan of Rs.. 76.84 lakhs to MTDC on behalf of the Government of Maharashtra Directive. The MTDC has not refunded this amount till date including interest. Therefore, the interest for the current Financial Year of Rs.. 7 Lakhs is not provided for. Accordingly, assessee was asked to explain why the accrued and unaccounted interest of Rs.. 69.38 crores sho....
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.... has been kept in a suspense account and has not been brought to profit and loss account of assessee, cannot be included in income of assessee. Further we state that even your predecessor had disallowed the same in A.Y 2008-09 and the same was deleted by Hon. CIT(A) vide order dated 19-07-2011. The relevant para of CIT(A) order is as under "I have duly considered the submission of the appellant's AR. I agree with the submission of the AR that when the principal amount has itself not been received, the assessee is justified in not accounting the accrued interest". 13. After considering the submissions of the assessee, Assessing Officer rejected the submissions made by the assessee and proceeded to make the addition. Assessing Officer considered the fact that revenue was in appeal before ITAT against order of the Ld.CIT(A). 14. Aggrieved with the above order, assessee preferred appeal before Ld.CIT(A) and before Ld.CIT(A) assessee filed detailed submissions. After considering the detailed submissions of the assessee, Ld.CIT(A) upheld denial of exemption u/s 11 of the Act but on a new ground that activities of the assessee are not charitable in nature. (Pg.....
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....claimed by the Appellant. GROUND II: 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that the Appellant is not an agent of the State Government while acting as "Special Planning Authority" as appointed by the State Government under the Maharashtra Regional and Town Planning Act, 1966. 2. The Appellant prays that on facts and in law it be held that the Appellant is an Agent of the State Government while acting as "Special Planning Authority" and hence it cannot be taxed/assessed on income, if any, which accrues or arises to the State Government or any receipts which Appellant receives for and on behalf of the State Government. GROUND III 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the action of the AO of making addition on account of the lease premium received by the Appellant as income of the Appellant. 2. The Appellant prays that the lease premium received by the Appellant is liability payable to the State Government and cannot be taxed in the hands of the Appellant. GROUND IV: NON-DEDUCTION OF THE EXPENDITURE INCURRED TOWAR....
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....thin the meaning of the term "Local Authority" as defined in the Bombay General Act, 1904. Also, section 17(2) of the MMRDA Act states that the Metropolitan Commissioner and the authority shall be deemed to be the Municipal commissioner and corporation respectively and shall exercise powers of the Municipal commissioner and corporation. 3. Therefore, the Appellant prays that the AO be directed to allow the exemption u/s 10(20) of the Act. GROUND VII: 1. On the facts and in the circumstances of the case and in law, the Appellant prays that the interest levied u/s 234B of the Act of Rs. 221,43,96,216 be deleted. GROUND VIII: GENERAL The Appellant craves leave to add to, amends and / or alter the above ground of appeal at the time of hearing." 16. At the time of hearing, assessee preferred to press only Ground No. 1, 2, 3 and 4, other grounds were not pressed. Accordingly, other grounds are dismissed as not pressed. 17. At the time of hearing Ld. AR of the assessee submitted detailed submissions and also filed written submissions, for the sake of brevity it is reproduced below: - "Ground No. I: Denial of Exemption u/....
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....for AY 2009-10 (Pg. 223-234 of PB) and High Court order for AY 2006-07 (Pg. 220-222 of PB) in Appellant's own case. The Tribunal and the High Court have decided the same relying on the decision of Supreme Court in Gujarat Maritime Board (295 ITR 561) [(Pg. 1-6 of Legal Paper Book (`LPB')]. Therefore, the CIT (A) erred in holding that Appellant is not eligible for exemption under section 2(15) of the Act. 2. Further, the DIT(E) had withdrawn registration u/s.12AA on the alleged ground that activities of Appellant are not "charitable" in view of the proviso to section 2(15) of the Act. The said order has been revered by the ITAT (Pg. 235 of FPB), thereby restoring registration u/s.12AA and Department appeal to Jurisdictional High Court has been dismissed (LPB Page 665 to 674). Thus, as of today, Appellant is duly registered as charitable trust u/s.12AA. 3. In Surat City Gymkhana (300 ITR 214) (SC) (Pg. 18 of LPB) the Supreme Court has held that registration of a trust u/s 12A once done is a fait accompli and the Assessing officer cannot make further enquiry into the objects of the trust. Therefore, the finding of the CIT(A) that the activities of th....
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.... b. Section 3 of the Act deals with the provision for establishment of the authority. (Pg. 7 of PB), c. Section 4 provides the composition of the Authority which inter a/ia include the Minister for Urban development, Minister for Housing, Mayor of Mumbai, etc. (Pg. 7 of PB), d. Section 12 deals with the powers and functions of the Authority. (Pg. 13 of PB) e. Section 20 provides that the property, funds and assets of the Appellant is to be held and applied for the purpose of the Appellant. (Pg. 19 of PB). 3. The Appellant may also refer to the MRTP Act under which the Appellant has been appointed as the 'Special Planning Authority' for the certain regions including the Bandra Kurla Complex. The relevant provisions of the MRTP Act are as under - a. The Preamble of the Act inter alia provides that the Act has been made for planning the development of various regions and with a view to ensure that the town planning schemes are made in the proper manner and their execution is made effective. (Pg. 46 of PB) b. Section 3 gives the power to the state government to notify the regions for the purpose of the Act. (Pg. 51 of ....
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.... in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of 'general public utility' will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is 'charitable purpose' within the meaning of section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business. For the above it is clear that only entities carrying on regular trade or business are to be excluded from the ambit of charity and genuine charitable organization would not be affected. The Circular further provide that where the object of 'general public utility' is only a mask or a device for carrying on the activity of trade, commerce or business would the proviso to section 2(15....
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....f the case. Ordinarily, Chambers of Commerce and similar organizations rendering services to their members would not be affected by the amendment and their activities would continue to he regarded as "advancement of any other object of general public utility".' Para 7 In consonance with such assurance given by the Finance Minister on the floor of the House, CBDT issued a Circular No. 11 of 2008 dated 19th December 2008 explaining the amendment as under: - "3. The newly inserted proviso to section 2(15) will apply only to entities whose purpose is 'advancement of any other object of general public utility' ie., the fourth limb of the definition of' charitable purpose' contained in section 2(15). Hence, such entities will not be eligible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on any activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity. 3.1 There are industry and trade associations who claim exemption from tax under section 11 on....
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....trade, commerce or business or renders any service in relation to trade, commerce or business for a cess, fee and/or any other consideration. It is not aimed at excluding the genuine charitable trusts of general public utility but is aimed at excluding activities in the nature of trade, commerce or business which are masked as 'charitable purpose'. Para 9 Many activities of genuine charitable purposes which are not in the nature of trade, commerce or business may still generate marketable products. After setting off of the cost, for production of such marketable products from the sale consideration, the activity may leave a surplus. The law does not expect the Trust to dispose of its produce at any consideration less than the market value. If there is any surplus generated at the end of the year, that by itself would not be the sole consideration for judging whether any activity is trade, commerce or business - particularly if generating 'surplus' is wholly incidental to the principal activities of the trust; which is otherwise for general public utility, and therefore, of charitable nature. The Tribunal took into account the objects of the Trust, which are....
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....ct shall not be applicable ......... 15.1 Applying the aforesaid decision to the facts of the case on hand and the object and purpose for which the assessee is established/constituted under the provisions of the Gujarat Town Planning Act and collection of fees and cess is incidental to the object and purpose of the Act, even the case would not fall under second part of proviso to Section 2(15) of the Act. 15.2 Considering the aforesaid facts and circumstances of the case, we are of opinion that the learned Tribunal has committed a grave error in holding the activities of the assessee in the nature of trade, commerce or business and consequently holding that the proviso to Section 2(15) of the Act shall be applicable and therefore, the assessee is not entitled to exemption under Section 11 of the Act. For the reasons stated above, it is held that the proviso to Section 2(15) of the Act shall not be applicable so far as assessee- AUDA is concerned and as the activities of the assessee can be said to be providing general public utility services, the assessee is entitled to exemption under Section 11 of the Act. Both the questions are therefore, answered in favour of ....
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....y is credited including amount of contribution to be made by the State Government, such other money as may be paid to the authority by the State Government, Central Government or any other authority or agency by way of grant, loans advances or otherwise, income derived from premium on second and subsequent sale of vacant land, income from levy on vacant land, all fees, costs and charges received by the JDA under the JDA Act or any other law for time being in force, all money received by the JDA from the disposal of land buildings and other property movable and immovable and other transactions including lease money, urban assessment development charges and other similar charges and all money received by way of rents and profits or in any other manner or from any other source. A fortiori, as per the mandate of Section 54 of the JDA Act, all property funds and other assets vesting in the JDA shall be held and applied by it for the purposes and subject to the provisions of the Act. Suffice it to say that the entire funds of the JDA is mandatorily required to be utilized for discharging the functions to achieve the object of integrated development of Jodhpur Region. Thus, predominant ob....
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....ts and premises by the trust is only incidental and ancillary to its main purpose which at the cost of repetition is "town improvement" in almost every respect. Even where the plots are developed and premises are constructed and sold at the market price, the activity is not commercial or business venture per se but one necessitated on account of the implementation of the provisions of the trust through statutory schemes. The main purpose of such schemes is driven by public requirements and not as a commercial venture per se. They are incidental to the main object of the trust. D. CIT v. Lucknow Development Authority (38 taxmann.com 246) (Alh) Pg. 168-175 of HC) (Pg. 174 of LPB) Para 26. For the applicability of proviso to Section 2(15), the activities of the trust should be carried out on commercial lines with intention to make profit. Where the trust is carrying out its activities on non-commercial lines with no motive to earn profits, for fulfilment of its aims and objectives, which are charitable in nature and in the process earn some profits, the same would not be hit by proviso to section 2(15). The aims and objects of the assessee-trust are admittedly charit....
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....utions are not genuine or are not being carried out in accordance with the objects of the trust or institution, on being satisfied about the same the registration under Section 12A(1)(aa) of the Act could be cancelled and riot in any other circumstances. In the instant case, the registration of the respondent-entity was sought to be cancelled on the basis of the insertion of the proviso to sub-section (15) of Section 2 of the Act on the premise that the activity carried out by the respondent was purely trade and commerce and for a profit motive. But in the instant case of KIADB, it has been explained that the statutory authority therein was involved in the orderly development of industrial areas and hence, its activity was for the purpose of and in the nature of public utility service. The nature of the respondent-entity has been already discussed. Neither of the circumstances stated above apply insofar as the respondent assessee is concerned. Thus the Commissioner could not have cancelled the Registration Certificate vide order dated 28.11.2011. The Tribunal was therefore justified in setting aside the said order and by allowing assessee's appeal by placing reliance on the jud....
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.... also relies on the following other decisions of the High Courts and the Tribunals to support the proposition of the Appellant. 1 Sabarmati Ashram Gaushala Trust Vs Asst DIT(E) (362 ITR 539) (Guj HC) 2 GS1 India v. DGIT(E)(360 ITR 138)(Del HC) 3 Moradabad Development Authority v. ACIT (E)(168 ITD 564 4 Bangalore Development Authority v. ACIT (176 ITD 833) 5 Hoshiarpur Improvement Trust v. ITO (155 ITD 570) 6 Gujarat Cricket Association v. JCIT (E) (101 taxmann.com 453) 7 Surat Urban Development Authority v. DCIT (E)(182 ITD 20) 8 Jhansi Development Authority v. DCIT, C-4 (123 taxmann.com 247) 9 DOT v Mumbai Rail Vikas Nigam Ltd. (ITA No. 2880/M/2019) 10 Belgaum Urban Development Authority v CIT 423 ITR 3738. Further, the Appellant has also submitted an elaborate chart drawing parallel between the MMRDA Act and the Acts pertaining to other development authorities considering which various High Courts have decided the issue in favour of the assessee. For ease of reference, on a sample basis, the Appellant has drawn parallel with: a. Ahmedabad Urban Development Authority (formed....
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.... element of profitering but it is only for recovery of cost only. It is submitted that even the entire amount realized by selling the lands to the extent of 15% of the Urban Development Area, is required to be used by the assessee only to carry out the development work and other amenities/facilities to be provided like road, drainage, streetlight etc. It is submitted that therefore, the activities carried out by the assessee cannot be said to be profitering and/or in the nature of trade, commercial or business. In support of his above submission, he has relied upon the decision of the Division Bench of this Court in the case of Ahmedabad Green Belt Khedut Mandal v. State of Gujarat through Secretary 2001 (1) GLR 888 (paras 37 & 38). 7.11 It is submitted by Shri Soparkar, learned Senior Advocate for the assessee that by permitting the AUDA to sell the plots that is on element of profiter has been negatived by the Hon'ble Supreme Court in the case of Ahmedabad Municipal Corpn. v. Ahmedabad Green Belt Khedut Mandal [2014] 7 SCC 357. It is submitted that therefore, also the activities carried out by the assessee cannot be said to be in the nature of trade, commerce or busi....
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....8 of CIT(E) v. Yamuna Expressway Industrial Development Authority (395 ITR 18) (All HC) (Pg.190 of LPB) wherein the court has held as under - Para 48. In the context of Lucknow Development Authority (hereinafter referred to as "LDA") a statutory body constituted under UP. Urban Planning and Development Act, 1973 (hereinafter referred to as "UPUPD Act, 1973") in CIT v. Lucknow Development Authority, 2014 (2) AU I 578, a question arose whether it would be entitled for registration under Section 12A/12AA. On behalf of Revenue, it was argued that LDA is engaged in activities of acquiring land, developing plots, constructing residential as well as commercial places and selling thereto. Sales are also undertaken through auction process and sold to highest bidder, to earn more and more profits. Said activities are trade in nature and liable to tax. Revenue sought to equate LDA with private colonizers and builder. On behalf of LDA various provisions of UPUPD Act, 1973 were placed. This Court held that expression 'general' under Section 2(15) means pertaining to whole class. Advancement of any object or purpose to benefit public or a section of public is distinguished from ....
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....elopment Authority v. DCIT, C-4 (123 taxmann.com 247) and DCIT v Mumbai Rail Vikas Nigam Ltd. (ITA No. 2880/M/2019). In the case of, Gujarat Cricket Association v JCIT 101 Taxmann.com 453 (Ahd) @ para 37 (Pg. 314 of LPB) the Tribunal has held that the decision of Jalandhar Development Authority not a binding precedent as the contrary view in the case of 1-Joshiarpur has been considered and approved by the P & H HC. Further, the Tribunal in this has recorded a finding of fact that the assessee therein was purchasing land at low rates and selling the same at higher rates. Whereas in MMRDA's case, the assessee has not purchased the land and the land has been vested on the assessee by the Government. c. Jammu Development Authority - the Appellant submits that this decision deals with the case of registration of a authority unfed section 12A and not with respect to the applicability of proviso to section 2(15). Secondly, the Appellant submits that the said case the High Court has given a finding that the Assessee therein was not acting to advance any object concerning general public utility. (Pg. 15 of PB of adverse decision) Thirdly, this decision has been considered by th....
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....ct particularly in view of the addition of first and second proviso made by the Finance Act, 2008 w.e.f 1.04.2009 to Section 12AA of the Act. There are findings of fact that the assessee-appellant has not been acting to advance any of the object concerning general public utility. Even otherwise the proviso which has been added by the Finance Act, 2008 w.e.f 01.04.2009 stipulates that the advancement of any other object of the general public utility shall not be a charitable purpose, if it involves carrying on of any activity in the nature of trade commerce or business or any activity of rendering any service in relation to any trade, commerce or business or a cess or fee of any other consideration. 2. We find that no question of law much less a substantial question of law would emerge from the impugned order of the Income Tax Appellate Tribunal warranting admission of the appeal. The appeal is wholly without merit and is thus liable to be dismissed. 3. For the reasons aforementioned, this appeal fails and same is dismissed along with connected application(s)." The judgment is of no assistance to the appellant for the Division Bench observed that there wer....
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....said that the activities carried out by the assessee can be said to be either in the nature of trade, commerce or business, or rendering any services in relation to any trade, commerce or business for a Cess- or Fee or any other consideration so as to attract proviso to Section 2[15] of the IT Act. 16. Identical question came to be considered by Division Bench of this Court in the case of Ahmedabad Urban Development Authority v. Asstt. CIT (Exemption) [2017] 83 taxmann.com 78 and other allied Tax Appeals, by which with respect to the Urban Development Authority established and constituted under the provisions of the Gujarat Town Planning & Urban Development Act, 1976, it is held that the activities carried out by the Ahmedabad Urban Development Authority cannot be said to be for commercial purpose and proviso to Section 2[15] of the IT Act shall not be applicable and that the said Ahmedabad Urban Development Authority shall be entitled to exemption under Section 11 of the Act. Division Bench of this Court also observed and held that merely because AUDA is charging fees and/or cess, the activities cannot be said to be in the nature of trade, commerce or business and consequ....
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....s in suitable areas in the State of Karnataka. Section 6 of the KIAD Act deals with the constitution of the Board of the Assessee, which provides that the officers of the State Government, namely, the Secretary to the Government of Karnataka, Commerce and Industries, Department who shall ex-officio be the Chairman of the Board, the Secretary to the Government of Karnataka, Finance Department, the Secretary to Government, Housing and Urban Development Department, the Commissioner for Industrial Development and Director of Industries and Commerce, the Chairman and Managing Director, Karnataka State Industrial Investment and Development Corporation Limited, the Chairman, Karnataka State Pollution Control Board, the Director of Town Planning, the Managing Director, Karnataka State Small Industries Development Corporation Limited, the Managing Director, Karnataka State Financial Corporation, the Executive Member of the Board and two nominees of the Industrial Development Bank of India shall be the members of the Board of the assessee. Thus, the assessee is virtually controlled by the State Government. From perusal of section 13 of the Act, it is evident that the function of the Board is....
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.... Tribunal has therefore, recorded the conclusion that the assessee is engaged in the charitable activity through advancement of an object of general public utility and therefore, has concluded that the Proviso to section 2(15) of the Act is not applicable to the case of the assessee and has further held that the assessee is entitled to benefit of Section 11 u/s the Act. It has also been noticed that the Assessing officer has not disputed that the assessee fulfills the conditions, which is necessary for allowing the exemption of the deductions applicable under the Act except Proviso to Section 2(15) of the Act. Thus, the Tribunal has held that the Proviso to section 2(15) of the Act is not applicable to the case of the assessee. h. Without prejudice, the Appellant submits that, even if it is held that two non- jurisdictional High Court have taken different views, then also, the view in favour of the assessee ought to be adapted. (CIT v. Vegetable Products Ltd. (88 ITR 192) (SC). Similar view has been expressed by the Tribunal in Bangalore Development Authority v ACIT 176 ITD 833 at para 5.10.5, Pg. 248-249 of LPB and Jhansi Development Authority v DCIT 123 Taxmann.com 247 a....
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....o. 10 of 2016) to hold that the Appellant cannot be regarded as the agent of the Government. (pg. 46 -51 of the CIT(A)'s Order) Submission of the Appellant: 1. The Appellant's case on agency is based on the provision of the MRTP Act. The Appellant has been notified as 'Special Planning Authority' for the region of Bandra Kurla Complex under section 40(1)(c) of the MRTP Act. The relevant notification dated 7th March, 1977 is at Pg. 266-268 of the PB. It is clear from the notification that the Appellant has been appointed as 'Special Planning Authority' in place of City and Industrial Development Corporation of Maharashtra Ltd. 2. Section 40(3) provides that the provision of 'chapter VI' of the MRTP Act would apply to Special Planning Authority as the apply to a 'New Town Development Authority' appointed under the said Chapter. (Pg. 76 of PB). The same is also mentioned in para 2 of the notification dated 11111 April, 1977 (pg. 300 of FPB) 3. Section 113(3A) of the MRTP Act provides that the New town Development Authority appointed under the said section would Act as an agent of the State Government. (Pg.119 ....
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....laim of agency was not made on basis of Article 289 of the Constitution of India and, hence, the decision of Supreme Court in Adityapur Industrial Area Development Authority Vs UOI (supra), holding that the Authority therein was not a state and, hence, benefit of A. 289 of the Constitution would not be available is of no relevant. The Appellant's claim of being an agent of Government was based on the provision of the MRTP Act (Section 113(3A) r.ws. 40(1)(c) and 40(3)) and the Government Resolutions issued by the Government from time to time. 6. The Appellant further submits that the decision of the Bombay High court in the case of MIDC (ITA NO. 10 of 2016) is not applicable to the facts of the present case. The Appellant submits that the Question of law raised by MIDC in the said appeal is with respect to applicability of A. 289 of the Constitution of India. The High Court held that to the extent that the Tribunal has given a finding that CIDCO has given a finding that CIDCO is entitled to benefit of A. 289 of the Constitution of India, the same is contrary to the decision of the Apex Court in the case of Adityapur Industrial Area Development Authority Vs UOI (153 Taxm....
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....t is important to note that AO has not given any adverse finding on expenses or application but simply assessed Appellant on gross income by denying section 11 exemption. Finding of CIT(A): The CIT(A) has decided this issue against the Appellant at Page 69/70 of his order by holding that Appellant has failed to demonstrate that expenses are revenue in nature and failed to provide documentary evidence. Submissions of the Appellant: 1. If Ground No 1 is allowed and it is held that Appellant is entitled to exemption u/s. 11 of the Act engaged in charitable activities, the amount expended/incurred be allowed as application of income. Under the circumstances, if the ground number one is being allowed, the only prayer of the Appellant is to give a direction to the Assessing Officer to allow all payments made by the Appellant on the ground that it is application of income by a charitable institution. 2. If Ground No. II is allowed, and it is held that receipts received or earned by the Appellant is not assessable as Appellant own income as Appellant is agent of the State Government, the question of allowing related expenses also does not arise;....
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....t of Maharashtra and lease premium not the income of the Assessee, Ld DR submitted as under: (i) The Assessee is a separate entity and, therefore, the income of the Assessee cannot be regarded as income of the State. To substantiate this proposition, he relied on the decision of Andhra Pradesh State Road Transport Corporation vs. Income Tax Officer - 52 1TR 524. He further relied on Section 3 of the MMRDA Act (page-7 of Factual Paper-book) and Section 126 of the MRTP Act (page-134 of Factual Paper- book) to submit that the land is vested in the authority and, therefore, the authority cannot be an agent of this State. (ii) He further submitted that the decision of CIDCO is not applicable to the case of the Assessee. 20. With regard to ground No.4 - Allowability of expenditure while computing business income, Ld DR submitted that irrespective of the profit motive, once the activity of the Assessee is commercial in nature, it will have to be regarded as business activity and income of the Assessee will have to be computed under the head "Income from business and profession". He submitted that this issue may be remanded to the Assessing Officer for verification of ....
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.... / institution which is carrying on an activity behind the 'mask' or 'device' to hide the true purpose, which is trade, commerce and business, such activity of the trust would be hit by the proviso to Section 2(15) of the Act. Therefore, the Appellant submits that the term 'business', as used in the proviso to Section 2(15) of the Act, has to be interpreted inconsonance with the Finance Minister's speech and CBDT Circular as extracted above. The decisions relied on by the Department's Representative are not in the context of Section 2(15) of the Act or the proviso inserted therein. These are general decisions on the meaning of scope of the term 'business' and, therefore, would not be relevant for deciding the scope of the proviso to Section 2(15) of the Act. In so far as the interpretation of Section 2(15) of the Act is concerned and particularly whether the activity of an assessee is a 'mask' or 'device', the Appellant is relying on the following observations by various High Courts in cases similar to that of the Appellant to hold that once the activity cannot be regarded as a 'mask' or 'device' it cannot come....
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....ndustrial Development Authority [2017] (395 ITR 18) (Allahabad) - page no.176 to 197 of LPB - relevant page no. 187 "36. Entities which carry on commercial activities will not be eligible for exemption under Section 11 or 10(23C) of Act, 1961. Whether an entity is carrying on activities in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of activities. It is said that an Assessee, if engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is "charitable purpose". In such a case, object of general public utility will be only a mask or a device to hide the true purpose, which is trade, commerce or business, or rendering of any service in relation to trade, commerce or business. In our view, each case would depend on its own facts and no generalization is possible." iv. Sabarmati Ashram Gaushala Trust vs Asst DIT(E) 120141 362 ITR 539 (Gujarat) - page no. 62 to 68 of LPB, relevant page no. 66. "8. What thus emerges from the statutory provisions, ....
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....lature has not omitted or suitably amended the said proviso to support the contrary interpretation. Even otherwise, the beneficiaries of GS 1 system are not confined or restricted to persons from trade, commerce or business. The beneficiaries are present everywhere and the advantages are permeating and universal and would include consumers, government, beneficiaries of PDS etc. 4. Similar view has been taken by various tribunals in the following decisions - a. Bangalore Development Authority v. ACIT [2019] 176 ITD 833 (Bangalore - Trib.) - page No 229 to 249 of LPB b. Hoshiarpur Improvement Trust v. ITO [2016] 155 LTD 570 (Amristar - Trib.) - page no. 250 to 274 of LPB c. Jhansi Development Authority v. DCIT, C-4 [2021] 123 taxmann.com 247 (Agra Trib.) page no. 473 to 581 of LPB d. DCIT (E)-2(1), Mumbai Railway Vikas Nigam Limited (ITA No.2880/Mum/19) (Mumbai Trib.) Page no. 582 to 618 of LPB - Relevant Page no. 598, 602, 607 5. From the aforesaid, it is clear that while interpreting the term business in the context of the proviso to section 2(15) of the Act, general meaning of the business is not relevant as one has to consider....
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....le institution. The Appellant also submits that the Department cannot go beyond the CBDT Circular as well. Ground No. 2 & 3: Appellant acting as an agent of the Government of Maharashtra & lease Premium not the income of the Appellant: 1. The Appellant submits that the departmental representative has misunderstood the submissions of the Appellant. The Appellant reiterates that it is not the case of the Appellant that the income of the Appellant is not taxable under Article 289 of the Constitution of India on the ground that the Appellant is the 'State'. The Appellant submits that the case of the Appellant is that in carrying on the activity as 'Special Planning Authority', the Appellant is merely acting as an agent of the Government of Maharashtra and, therefore, income, if any, from such activity cannot be assessed to tax in the hands of the agent. The Appellant submits that the issue before the Hon'ble Supreme Court in the case of Andhra Pradesh State Road Transport corporation (supra) was whether the Corporation can be regarded as the State for the purpose of claiming benefit of Article 289 of the Constitution. It was, in that conte....
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....ssary implication that the income derived by the corporation from its trading activity would be the income of the State. The doctrine of the separate entity or personality of the corporation is always subject to the exceptions which statutes may create, and if there is a statutory provision which clearly indicates that despite the concept of the separate personality of the corporation, the trade carried on by it belongs to the shareholders who brought the corporation into existence and the income received from the said trade likewise belongs to them, that would be another matter. It would then be possible to hold that as a result of the specific statutory provisions the income received from the trade carried on by the corporation belongs to the shareholders who have constituted the said corporation, and su, we must look to the Act to determine whether the income in the present case can be said to be the income of the State of Andhra Pradesh." 2. From the above, it is clear that the Supreme Court accepts that, if by express provisions, the income of Corporation would be the income of the State, then the Corporation will not be chargeable to tax for such income. In the prese....
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.... is established under the MMRDA Act, 1974. As per which the assessee is established to function, activity of development as set out in the section 2 of the MMRDA Act and it is extended arm of the Government Maharashtra in the activity of development as set out in Section 12 to 16 of the Act. We also observe that the assessee is appointed as special planning authority for development of certain regions as per the government notification like Bandra Kurla Complex region etc. under the Maharashtra Region and Town Planning Act (MRTP Act). As per the section 113(3A) of the Act, it is acting as an agent of the Government of Maharashtra. By considering the above facts on record, Ld DIT(E) granted the registration u/s 12A on 22.07.2002. 23. Further we observe from the record that the Assessing Officer continue to disallow the claim of exemption u/s 11 from AY 2003-04 holding that the assessee is not a lawful trust within the meaning of the term Trust for the purpose of sections 11, 12 and 12A of the Act and its activities are not charitable. We observe from the record that Ld.CIT(A) and coordinate benches have decided the issue of allowing the exemption u/s 11 in favor of the assessee. ....
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.... under: - 22. We had already extracted in the preceding paragraph, the objects of the association. Going by the objects, we find that the trust falls under the head of "any other object of general public utility" and hence falls within the meaning of charitable purpose under Section 2(15) of the Act. Section 2(15) of the Act defines "charitable purpose" as it originally stood at the time of grant of registration as under:- "'charitable purpose' includes relief of the poor, education, medical relief and the advancement of any other object of general public utility." 23. Section 2(15) was amended under Finance Act, 2008, with effect form 1.4.2009 by substituting the following provision which reads s under: "2. Definitions. .... (15) "charitable purpose" includes relief of the poor, education, medical relief, preservation of environment (including waterheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility. Provided that the advancement of any other object of general public utility shall not b....
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....nt purpose would not prevent the trust or institution from being a valid charity: vide CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC) (referred to in the decision reported in (1980) 121 ITR 1(Addl. Commissioner of Income-tax v. Surat Art Silk Cloth Manufacturers Association). Thus if the dominant object or the primary object was charitable, the subsidiary object for the purpose of securing the fulfilment of the dominant object would not militate against its charitable character and the purpose would not be any the less charitable. The amendment in the year 2008 made a drastic amendment to deny the status of a charitable purpose to an institution with the object of general public utility, having any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration. 25. Proviso to Section 2(15) of the Income Tax Act states that if the objects involve the carrying on any activity in the nature of trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the incom....
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....rom 01.06.2010 therein empowering the Commissioner to cancel the registration granted under the stated circumstances, reads as under:- Provision inserted under Finance Act, 2004: Section 12AA(3):- Where a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution. Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard. 31. After amendment in the year 2010, Section 12AA(3) of the Income Tax Act reads as follows: "Section 12AA(3):- Where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A as it stood before its amendment by the Finance (No.2) Act, 1996 (33 of 1996) and subsequently the Commissioner is satisfied t....
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....ld arise in such cases is the question of considering whether Section 11 of the Act would at all apply to exempt these income from liability. These are matters of assessment and has nothing to do with the genuineness of the activity or the activities not in conformity with the objects of the trust. As rightly pointed out by learned Senior counsel appearing for the assessee, as is evident from the reading of Circular No.11 of 2008 dated 19.12.2008, the object of the insertion of first proviso to Section 2(15) of the Act was only to curtail institution, which under the garb of 'general public utility', carry on business or commercial activity only to escape the liability under the Act thereby gain unmerited exemption under Section 11 of the Act. 36. In the decision reported in (2012) 343 ITR 23 (Bom) (Sinhagad Technical Education Society V. Commissioner of Income Tax (Central), Pune & Anr), the Bombay High Court held as follows: "As a result of the amendment, which has been brought about by the Finance Act of 2010, Subsection (3) of Section 12AA has been amended specifically to empower the Commissioner to cancel a registration obtained under Section 12A as i....
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.... satisfy himself about the genuineness of the activities of the trust or institution. In order to satisfy himself, the Commissioner may also make such enquiry as he may deem necessary in that behalf. In the event the Commissioner satisfies himself that the trust is entitled to registration keeping in mind the objects, shall grant registration in writing in terms of Section 12AA(1)(b)(i) of the Income Tax Act, 1961. In the event the Commissioner is not satisfied, he shall refuse such registration in terms of Section 12AA(1)(b)(ii) of the Income Tax Act, 1961. Once such a satisfaction is arrived at by the Commissioner to grant, such registration cannot be cancelled by following the very same provision of section 12AA(b)(i) of the Income Tax Act, 1961 to go into the genuineness of the activities of the trust. However, the Commissioner is empowered to revoke the certificate in terms of Section 12AA(3) of the Income Tax Act, 1961. As Commissioner is empowered to revoke the certificate in terms of section 12AA(3) of the Income Tax Act, 1961. As per the said provision, in the event the Commissioner is satisfied subsequently i.e., after registration that the activities of such trust or ins....
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....(3) of the Act is of any doubt for a fresh look. It is relevant herein to point out that in two other assessee's case, the Income Tax Appellate Tribunal, Ahmedabad Bench-A rendered in the case of Gujarat Cricket Association Vs. DIT (Exemption) in ITA.No.93(Ahd)/2011 dated 31.01.2012 and that of the Nagpur Bench rendered in the case of M/s.Vidarbha Cricket Association Vs. Commissioner of Income-tax-I, Nagpur in ITA.No.3/Nag/10 dated 30.05.2011, considered the said decision reported in 343 ITR 300 in the case of CIT Vs. Sarvodaya Ilakkiya Pannai rendered under Section 12AA(3) of the Act. On appeal before the respective High Courts, the decision of the Income Tax Appellate Tribunal was confirmed. 43. Leaving that aside, there being no dispute raised by the Revenue as to the genuineness of the trust, or as to the activities of the trust not being in accordance with the objects of the trust, the question of cancellation under Section 12AA of the Act does not arise. We further hold that at the time of grant of registration on 28.3.2003, the same was made taking into consideration the objects of the institution fitting in with the definition of 'charitable purpose' de....
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.... with reference to the objects accepted and registered under Section 12AA, as per the law then stood under the definition of Section 2(15) of the Income Tax Act. Even therein, Courts have defined as to when an institution could be held as one for advancement of any other object of general public utility. Thus, if a particular activity of the institution appeared to be commercial in character, and it is not dominant, then it is for the Assessing Officer to consider the effect of Section 11 of the Act in the matter of granting exemption on particular head of receipt. The mere fact that the said income does not fit in with Section 11 of the Act would not, by itself, herein lead to the conclusion that the registration granted under Section 12AA is bad and hence, to be cancelled. 46. It may be of relevance to note the language used in the definition "charitable purpose" in Section 2(15) of the Act, which states that charitable purpose includes relief of the poor, education, medical relief and advancement of any other object of general public utility. The assessee's case falls within the phrase of the definition general public utility. In the decision reported in (2000) 246 ....
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....he fact remains that the understanding of the scope of the expression "general public utility" would nevertheless is of relevance herein. Admittedly when the assessee was granted registration, the Revenue recorded its satisfaction that the objects are of charitable purpose. Thus only possible enquiry under Section 12AA of the Act for cancellation is to find out whether the activities of the trust are genuine or in accordance with the objects of the trust. If any of the income arising on the activities are not in accordance with the objects of the trust, the assessees income, at best, may not get the exemption under Section 11 of the Act. But this, by itself, does not result in straight rejection of the registration as 'trust' under Section 12AA of the Act. Consequently, we reject the prayer of the Revenue that Section 12AA(1) of the Income Tax Act, 1961 must be read along with Section 12AA(3) of the Income Tax Act, 1961 before considering the cancellation. 49. As far as the unreported decision of this Court in T.C(A).No.91 of 2013 dated 29.04.2013 (Gowri Ashram Vs. Director of Income Tax (Exemptions) is concerned, on which heavy reliance was placed by the Revenue, ....
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....e amount received from BCCI as subsidy are commercial. As regards conducting of IPL Matches, he pointed out that though no services are rendered by the assessee for conducting the matches, the ground where the matches are played are given for rent which is a commercial venture. The subsidy received from BCCI included mainly TV Advertisements sold by BCCI for the conduct of IPL and their commercial receipts arising for IPL transactions. Therefore, the nature of receipt was important than the name of account under which it was accounted. Thus he viewed that the objects and activities would no longer come within the definition of Section 2(15) of the Act after the amendment come in effect from 01.04.2009. 52. As rightly pointed out by the assessee, the Revenue does not question the objects of the Association as not genuine or are in accordance with the objects. All that the Revenue stated was that the nature of receipt could not be called a subsidy. Thus Revenue came to the conclusion that the objects and activities could not come within the meaning of 'charitable purpose' under Section 2(15) of the Act. 53 On going through the materials, the Income Tax Appel....
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....e no materials to indicate that the grant of registration was not based on materials indicating objects of general public utility." 8. We have gone through the order of DIT(E) and could not find anything in the order which terms that the assessee was undertaking any activity which is not genuine or trust or institution is not genuine. We could not lay our hand on any material in the order of DIT(E) which explains that the assessee or its affairs are not being carry out in accordance with the object of the institution. Accordingly, we quash the order of DIT(E) and restore the registration of the Institution. This issue of assessee's appeal is allowed. 9. Since, the registration is already allowed consequently no disallowance can be made in respect to interest income and leasing activity income i.e. the rent and other fees, because these falls under the objects of the assessee's institution and hence on merits also the assessee has a case. Accordingly, we need not to elaborate on the merits of the case, since we have already allowed registration." 25. Therefore, from the above decision of the coordinate bench, the assessee is continue to be duly registered as cha....
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....n 2(15) of the Act, particularly when the issues are already settled in favor of the assessee by the coordinate bench. 28. With regard to other issues in the assessment order on non-deduction of the expenditure incurred towards the objects while computing the income under the Income Tax Act, this issue was already addressed by us in the earlier para that the assessee is eligible for deduction u/s 11, the income or loss of the assessee has to be determined as per section 11 of the Act, therefore, we are directing the Assessing Officer to determine the income or loss of the assessee as per law. 29. With regard to Department appeal, since we already adjudicated that the assessee is eligible for deduction under section 11 and Assessing Officer is directed to compute and determine the income or loss as per section 11 of the Act, the department appeal becomes academic. Therefore, we dismiss the appeal filed by the revenue. 30. With regard to other Assessment Years, there are new grounds raised by the assessee and relevant facts brought to our notice by Ld AR in his submissions are as under: - "1. Disallowance of the Expenditure incurred towards furtherance of objects in....
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.... Infrastructure charges, Development Charges and Scrutiny fees. Ground IV and V of AY 2013-14 and Ground IV and V of AY 2014-15 The Appellant submits that AO during AY 2013-14 and AY 2014-15, has added the abovementioned charges to the income of the Appellant. Further, CIT(A) has simply upheld the decision of the ld. AO in line with lease premium without separate adjudication. The Appellant submits that the nature of these items of receipts and corresponding accounting treatment is pari-materia with that of the lease premium i.e. the same is received by the Appellant in its capacity as an agent of the State Government and the same is Liable to be paid to them, therefore it is shown as liability in the books of accounts of the Appellant. As such, such receipts cannot be held as income of the Appellant in the same line as that of lease premium. Reliance is also placed on Appellant's arguments in support of Ground No. III on Lease Premium. Further, Your Honours may please appreciate that these receipts have always been accounted for in the same manner in all earlier years as well and the same have always been by the Department in all those earlier years. How....